ECONOMIC POLICY BRIEF
A P R I L
2 5 ,
2 0 1 1
ECONOMIC, FISCAL AND SOCIAL
IMPACTS OF PREVAILING WAGE IN
SAN JOSE, CALIFORNIA
INTRODUCTION
In the city of San Jose and the surrounding metropolitan area, the
construction industry carries considerable economic importance,
employing more than 30,000 people each year. The NOVA Workforce
Investment Board described construction as a foundational occupation,
creating the infrastructure necessary for the South Bay region to attract
and grow driving industries.1
In this highly mobile industry, where paychecks depend on the weather
and workers are employed only for the length of a construction contract,
industry and community have developed tools designed to ensure safety
and quality of work and to induce positive economic impacts from major
construction projects. One such tool is prevailing wage on public works.
Prevailing wage is an important economic development tool in the state
of California. Both the state and the federal government utilize prevailing
wage policies which apply to taxpayer-funded public works projects
receiving state or federal funds. Many local governments in the state have
their own prevailing wage policies covering projects funded by local
taxpayers. The City of San Jose’s prevailing wage policy was adopted in
1988; its statutory purpose is to ensure equitable and sufficient wages,
protect local job opportunities, and stimulate the local economy.
This policy brief examines the economic, fiscal, and social impacts of San
Jose’s prevailing wage policy by analyzing a hypothetical scenario: how
would construction costs, tax revenues, overall economic activity, and
other relevant factors change if San Jose’s public works projects were not
built under prevailing wage?
• Over 5 years, estimated
increase in countywide
economic activity due to
prevailing wage for City of
San Jose buildings:
$164 million
o Estimated increase in
local jobs: 1,510
o Estimated increase in
local tax revenues:
$1.9 million
• Increase in local hiring on
libraries when prevailing
wage applies: 21%
• Miles driven daily by outof-town construction
workers: over 1 million
ABOUT THIS STUDY
This working paper is produced by Working Partnerships USA with funding from the Construction Employers’ Association,
the Bay Area Chapter of the Sheet Metal and Air Conditioning Contractors' National Association, the Santa Clara Valley
Chapter of the National Electrical Contractors Association, and the Northern California Mechanical Contractors Association,
collectively representing over 500 construction contractors in the Santa Clara Valley and Northern California. Dr. Kevin
Duncan, Professor and Senior Economist at the Healy Center for Business and Economic Research, Colorado State
University-Pueblo, carried out the economic impact analysis summarized on pages 3 to 7. Dr. Duncan’s complete analysis is
provided as Appendix A to this brief.
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KEY FINDINGS
Economic Impacts
•
Municipal building projects covered by a prevailing wage policy employ a higher proportion of
local contractors and local workers. Prevailing wage laws therefore help reduce the leakage of local
taxpayer dollars by directing public construction expenditures into the local economy.
•
If prevailing wage coverage is removed from a municipal building project, then roughly 6% of the
project’s value leaks from the Santa Clara County economy.
•
If prevailing wage had not applied to San Jose’s 2007-2012 municipal building projects:
o Total economic activity in the County would have fallen by $164 million.
o 1,510 fewer local jobs would have been created in the County.
o In addition to construction, the economic sectors with the greatest job loss induced by the loss of
prevailing wage include retail and food service (88 jobs) and health (57 jobs).
Fiscal Impacts
•
If prevailing wage had not applied to San Jose’s 2007-2012 municipal building projects:
o Reduced local contracting would have produced a $1.9 million drop in local property and sales
tax revenues for local governments within Santa Clara County.
o The shift of income away from blue-collar construction workers to contractors/owners would
result in additional economy-wide impacts. For every cumulative $1 million shift upwards in
personal income, the net effect is a decrease in county economic activity of $34,000.
•
The preponderance of studies over two decades have found no impact of prevailing wages on total
construction costs. Rather, prevailing wages are believed to increase labor productivity on a project.
Prevailing wage is a very low-cost economic development tool relative to other programs intended to
create jobs. The 1,510 additional jobs induced by prevailing wage on San Jose municipal projects
are equivalent to the total projected impact of the proposed Major League Soccer stadium.
•
Traffic and Environmental Impacts
•
In 2008, non-local construction workers employed in Santa Clara County cumulatively drove over 1
million miles per day to and from work. If the work done by non-locals was instead performed by
locals with shorter commutes, then the estimated savings would be 123,619,000 miles per year.
•
If a project is not covered by prevailing wage, then the shift towards a non-local construction
workforce induces excess commute miles, resulting in traffic congestion, less livable neighborhoods,
lower social cohesion and increased greenhouse gas emissions.
Social Impacts
•
Public assistance costs: A typical non-union construction employee on a non-prevailing wage project
without health benefits would be eligible for $3,665 in public assistance. At prevailing wage, the same
worker would earn enough to support his or her family with no public assistance.
•
Higher education: Prevailing wage also provides for employment of apprentices on public works. If
apprenticeship programs could no longer enroll students, then the result would be a loss of about
2,340 full-time student slots. This would be equivalent in scale to shutting down half of San Jose City
College.
•
Diversity: Relative to the total construction workforce in Santa Clara County, joint apprenticeship
programs employ 1.4 times more women and 4.7 times more African-Americans.
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CASE STUDY: MITCHELL PARK LIBRARY (PALO ALTO) AND GILROY PUBLIC LIBRARY
•
•
•
On the Mitchell Park Library in Palo Alto, built without prevailing wage, 11.7% of the
total project value went to local contractors.
On the similarly-sized Gilroy Public Library, built with prevailing wage, 71.2% of the total
project value went to local contractors.
Economic modeling of these individual projects shows a loss of 22 local jobs if the Gilroy
library had not been built under prevailing wage. The following sections will extend this
analysis from a single case study to all municipal building projects in San Jose.
Two recent library projects in Santa Clara
County provide a paired case study of the
impacts of prevailing wage.
The Gilroy Public Library and the Mitchell Park
Library and Community Center (in Palo Alto)
are about the same size and were bid just six
weeks apart. However, the Gilroy library was
built under a prevailing wage policy, while the
Palo Alto library was not.
The Gilroy project, at 53,000 square feet, has a
contract value of about $17 million and a square
foot cost of $326. The Palo Alto project, at
56,332 square feet, has a contract value of about
$24 million and a square foot cost of $430.
Consequently, there is no obvious support for
the hypothesis that prevailing wages increase
project costs.
The case studies do suggest that prevailing wage
increased local contracting. In Gilroy, 18 of 33
listed subcontractors and the general contractor
were based in Santa Clara County, totaling
71.2% of the total project value which went to
local contractors. In Palo Alto, only one of the
33 listed subcontractors was based in Santa Clara
County, totaling 11.7% of the total project value
which went to local contractors.
For the purposes of this case study, an economic
impact analysis using the IMPLAN modeling
tool was run on the Gilroy and Mitchell Park
libraries. The Gilroy analysis evaluates the
impact of the counterfactual scenario in which
the library was not built under a prevailing wage
policy. The Palo Alto analysis evaluates the
impact of the counterfactual scenario in which
the library was built under a prevailing wage
policy.
If the Gilroy Public Library had been built
without prevailing wage, the total economic
impact would be a $2.4 million decrease in local
economic activity and the loss of 22 local jobs,
including 17 direct construction jobs and 5
indirect jobs in retail, services, and other sectors
attributable to lost spending from local
construction workers. Fiscal impact would be a
net decline of $27,500 in sales and property tax
revenues for local governments within the
county.
In the reverse scenario, if the Mitchell Park
Library had been built with prevailing wage, the
total economic impact would be a $3.3 million
increase in local economic activity and 31 more
local jobs, with a fiscal impact of $38,800
additional tax revenues.
The maps on the following page show the
dispersion of subcontractor work for the two
projects.
Where
Go?
W A G Does
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Geographic Dispersion of Local Funds Spent for Library Construction
Dispersion of Funds from Palo Alto Library (W/Out Prevailing Wage)
Gilbert, AZ
Columbia, PA
Percent of
local funds
going to local
contractors:
11.8%
$5 - $10 Million
$3 - $5 Million
$1 - $3 Million
Under $1 Million
Dispersion of Funds from Gilroy Library (With Prevailing Wage)
Percent of
local funds
going to local
contractors:
71.2%
San Bernadino
$5 - $10 Million
$3 - $5 Million
$1 - $3 Million
Under $1 Million
Figure 1. Maps prepared by Scott Littlehale.
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IMPACTS OF PREVAILING WAGE IN THE SAN JOSE METRO REGION
Moving from case studies to a region-wide
perspective, the remainder of this brief focuses
on the economic, social, and fiscal impacts of
prevailing wage in the San Jose metropolitan
region.
The impact analysis includes the following
components:
•
•
•
•
•
•
•
•
Construction Costs
Economic and Fiscal Impact Analysis
Relative Importance to Economic
Development
The Bigger Picture
Public Assistance Costs
Education and Training Opportunities
Workforce Diversity
Traffic and Environmental Impacts
CONSTRUCTION COSTS
•
The preponderance of research shows no significant impact of prevailing wage on total
construction costs.
Standard economic theory suggests that as wages
rise, less labor will be used on a project, either
through an increase in labor productivity (via a
higher-skilled or more motivated workforce) or
through greater use of labor-saving equipment.
Prevailing wage policy can thus be expected to
affect the entire construction cost of a project,
not solely the hourly labor cost.
A recent study of five South Bay and Peninsula
cities3 compared public works projects in cities
with and without prevailing wage laws. The
study failed to find any effect of prevailing wage
on the total number of bidders, bids by union or
non-union contractors, or on the likelihood of
non-union contractors submitting the winning
bid.
Studies which examine the effect of prevailing
wage on total construction costs, using the
statistical method of regression analysis, have
overwhelmingly found no significant cost effect
of prevailing wage. Multiple studies using
different data sets, project types, and different
statistical tests have nearly all produced the same
result: prevailing wage laws are not associated
with higher construction costs.2
Furthermore, it found no impact of prevailing
wage law on the difference between the winning
(low) bid and either the median bid or the
engineer’s initial estimate. These findings
strongly suggest that cities with prevailing wage
laws did not experience less competitive bidding
or inflated bid prices compared to cities without
prevailing wage.
ECONOMIC AND FISCAL IMPACT ANALYSIS
•
•
•
Roughly 6% of the value of a library or similar project leaks from the Santa Clara County
economy if projects are not completed under prevailing wage policies.
If the City of San Jose’s major municipal buildings from 2007-2012 were not built under
prevailing wage, then major economic impacts would include reduction in total economic
activity of $164 million, net loss of 1,510 local jobs, and loss in local property and sales tax
revenues of $1.9 million.
In addition to construction, the economic sectors with the greatest job loss induced by the
loss of prevailing wage include retail and food service (88 jobs) and health (57 jobs).
Residential property values would also decline due to reduced economic activity.
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Moving from case studies to a region-wide
perspective, this study analyzes the economic
impacts of prevailing wage by modeling an
alternative scenario: what would have happened
in recent years if no San Jose municipal
prevailing wage had been in place?
The economic impact represents about 6% of
these projects’ combined value. This provides a
rule of thumb: about 6% of the value of a library
or similar project leaks from the Santa Clara
County economy if projects are not completed
under prevailing wage policies.
The economic impact analysis performed for
this study uses the IMPLAN software and local
data to estimate the effect of municipal
prevailing wage laws on the local economy.
IMPLAN provides sophisticated modeling
which is widely used in economic impact
analysis; for example, it is used by the federal
Bureau of Economic Analysis, several
departments of the State of California, the San
Jose Convention and Visitors Bureau, and the
Santa Clara Valley Transportation Authority.
For this study specifically, IMPLAN was used to
estimate the impact of a change in labor income
on the level of economic activity, employment,
and local taxes within Santa Clara County.
This initial analysis of libraries examined only a
small subset of the City of San Jose’s public
works. To better illustrate the impact of the City
of San Jose’s prevailing wage policy on the Santa
Clara economy, municipal building projects
from the city’s 2007-2012 Capital Improvement
Program (CIP) budget are used.4
Examining the 16 library projects built between
2003 and 2009, with total costs in 2010 dollars of
about $177 million, the IMPLAN model
provides a total net economic impact of –
$11,017,000, that is, a reduction in economic
activity of more than $11 million. The net
employment impact is a loss of 103 local jobs.
Table 1 shows detailed results of the economic
analysis on the 2007-2012 CIP projects. Major
impacts if these projects had not been built
under prevailing wage policy include:
• Reduction in total economic activity of $164
million, or about 0.1% of county GDP.
• Net loss of 1,510 jobs in Santa Clara County,
or about 0.2% of total county employment.
This includes a direct impact of 1,155 fewer
construction jobs and indirect impacts of
355 fewer jobs in other sectors.
• Total loss in local property and sales tax
revenues of $1.9 million.
• Decrease in sales taxes collected by the City
of San Jose of $181,000.
Table 1: Impact on the Santa Clara County Economy If San Jose’s 2007-2012
Capital Improvement Projects Were Built Without Prevailing Wage.
Includes only the impact from municipal building projects, comprising 60% of the total CIP.
Sources: IMPLAN, Quarterly Census of Employment and Wages.
Economic Impact Category
Economic Impact (2010 dollars)
Direct Income Decrease in the County:
Induced Decrease in Spending in the County:
Combined Economic Impact:
Direct Job Loss:
Secondary Job Loss:
Total Employment Decrease:
County Property Tax Revenue Decrease:
County Sales Tax Revenue Decrease:
Total County Tax Revenue Decrease:
Reduction in City of San Jose Sales Tax Revenue:
–$106,897,000
–$56,621,000
–$163,518,000
–1,155 Construction Jobs
–355 Local Retail and Service Sector Jobs
–1,510 Jobs in the County
–$1,483,000
–$421,000
–$1,904,000
-$181,000
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The economic impact of repealing the prevailing
wage standard would be spread across the local
economy, with industries not directly related to
construction experiencing substantial induced
impacts:
• The reduction in economic activity would
decrease home values in the county.
• The health care sector in the county would
experience a decrease in revenue of
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approximately $8.9 million and a decrease in
employment of about 57 workers.
The broad food service and retail sectors
would experience a decrease in revenue of
approximately $6.7 million and an
employment decrease of about 88 workers.
Additional impacts to specific industries within
Santa Clara County are shown in Table 2.
Table 2: Impact on Industry-Level Revenue and Employment
Santa Clara County Industry
Total
Imputed rental activity for owner-occupied dwellings
[indicates reduction in home values]
Real estate establishments
Private hospitals
Offices of physicians & dentists
Food services and drinking places
Wholesale trade businesses
Non-depository credit intermediation and related institutions
Monetary authorities and depository credit institutions
Telecommunications
Private junior colleges, colleges, universities
Legal services
Retail Stores - Food and beverage
Electric power generation- transmission
Medical and diagnostic labs and outpatient analysis
Other state and local government enterprises
Insurance carriers
Retail Nonstores - Direct and electronics
Securities, commodity contracts, investments
Nursing and residential care facilities
Retail Stores - General merchandise
Retail Stores - Motor vehicle and parts
Retail Stores - Clothing and clothing accessories
Services to buildings and dwellings
Religious organizations
Data processing, hosting, ISP, web search providers
Amusement parks, arcades, and gambling industries
Funds, trusts, and other financial vehicles
Automotive repair and maintenance, except car sales
Other personal services
Retail Stores - Health and personal care
Source: IMPLAN
Revenue Loss
by Industry
Job Loss by
Industry
–$56,621,017
–355
–$8,877,570
n/a
–$4,119,799
–$3,914,528
–$3,405,486
–$2,963,211
–$2,560,573
–$1,584,886
–$1,544,013
–$1,388,240
–$1,366,550
–$1,043,742
–$1,018,925
–$913,723
–$888,802
–$817,404
–$786,213
–$770,220
–$764,162
–$688,578
–$637,519
–$536,467
–$528,399
–$491,450
–$467,923
–$449,606
–$446,390
–$440,862
–$403,455
–$374,769
–$368,636
–23
–19
–23
–42
–8
–2
–5
–3
–11
–4
–13
–1
–5
–3
–2
–4
–9
–10
–10
–6
–8
–7
–3
–1
–4
–1
–4
–1
–5
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RELATIVE IMPORTANCE TO ECONOMIC DEVELOPMENT
•
•
•
Had prevailing wage not applied to San Jose’s 2007-2012 municipal building projects,
1,510 fewer local jobs would have been created in the County, representing a 0.2%
reduction in total employment.
The jobs induced by prevailing wage on these projects are equivalent to 80% of all local
jobs at Adobe Systems, or to the total jobs that would be induced by the proposed Major
League Soccer Stadium sought by San Jose.
The shift of income away from blue-collar construction workers to contractors/owners
would result in additional economy-wide impacts. For every cumulative $1 million shift
upwards in personal income, county economic activity decreases by $34,000.
As discussed in the previous section, the absence
of prevailing wage coverage for municipal
building projects from the City of San Jose’s
2007-2012 Capital Improvement Program (CIP)
budget would result in a net economic impact of
1,510 fewer jobs. This would produce a decline
in total Santa Clara County employment of
approximately 0.2%.
While small in the context of the entire regional
economy, this loss of 1,510 jobs is equivalent to:
• Losing 40% of all local jobs at Applied
Materials. 5
• Losing 80% of local jobs at Adobe Systems.6
• The total projected economic impact of a
proposed Major League Soccer stadium in
San Jose.7
• Three times the local jobs projected at
SunPower Corporation, to which the City of
San Jose recently offered a $2.5 million
incentive package.8
For the purpose of evaluating return on
investment of taxpayer dollars, the economic
development effects of local prevailing wage
policy can be compared to the standard
“economic multiplier” impacts of public
spending. Economic multipliers show the “ripple
effects” in the economy resulting from increased
output in a particular industry. For state and
local government enterprises in California,
economic multipliers indicate that inducing
1,510 jobs in the state would require increased
public sector output of $105,604,000.9
In addition to the effects included in the
economic and fiscal impact analysis, the
elimination of prevailing wage is also likely to
reduce wages for the construction workforce
employed on the job.
The labor income thus reduced would then shift
to another production factor, which (since the
cost of materials is typically fixed) would likely
be income for the contractor/owner. This
reduction in wages and shift in income is
difficult to quantify at the local level, and
therefore was not included in the economic
impact analysis.
An illustrative analysis of an upward shift of
$1,000 in household income - again using the
IMPLAN model for Santa Clara County –
provides insight into the potential effects. If
income decreases by $1,000 for a household
earning $75,000 to $100,000, and simultaneously
increases by $1,000 for a household earning
above $150,000, the net effect is a decrease in
county economic activity of $34.
Generalized, this result indicates that for any
upward shift in income between these two
brackets, total economic activity will decline by
3.4% of the amount shifted.
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THE BIGGER PICTURE: IMPACTS OF ALL PREVAILING WAGE POLICIES
•
A conservative estimate suggests that all prevailing wage policies in effect within the
county from 2008 to 2010 had a cumulative impact of $75 million in additional economic
activity.
The preceding analysis examined only projects
built by the City of San Jose. Yet nearly all public
works within Santa Clara County – with the
exception of City of Palo Alto-funded projects –
are built under local, state, or federal prevailing
wage policies.
To estimate the cumulative impacts of all
prevailing wage policies on the county economy,
we obtained total public building construction
expenditures in Santa Clara County for 2008 to
2010. This includes all federal, state, or local
government building projects, but does not
include non-building public works such as roads
and sewers. Palo Alto projects were subtracted
from this total, resulting in $1,244,428,000 in
public building projects built from 2008-10
which were covered by prevailing wage.
Applying the “6% rule” derived from the
preceding analysis of library projects – that is,
roughly 6% of the value of a library or similar
project leaks from the Santa Clara County
economy if projects are not completed under
prevailing wage policies – this data suggests that
Santa Clara County economic activity was
increased by $74,666,000 from 2008-2010
because of federal, state, county, and city
prevailing wage regulations on municipal
buildings.
This estimate is highly conservative because it is
based only on public building projects, omitting
the impact associated with other public works
construction such as roads, sewers, and other
infrastructure-related projects (which are
outside the scope of this study).
The estimates are also conservative because the
6% rule was derived from the repeal of a city
prevailing wage policy, assuming that federal
and state policies remain in effect. If prevailing
wage regulations were removed at all levels, then
it is likely that the impact would exceed 6%.
With complete repeal of prevailing wage
standards, the structure of the regional
construction labor market would change as
construction worker income falls and workers
move from the Bay Area to locations with lower
costs of living.
PUBLIC ASSISTANCE COSTS
•
A typical non-union construction employee on a non-prevailing wage project without
health benefits would be eligible for $916 to $8,032 in public assistance for his or her
family. At prevailing wage with health benefits, the same worker would earn enough to
support his or her family with no public assistance.
In high-cost Silicon Valley, workers with low
wages and no health coverage face particular
challenges in supporting their families.
Inadequate compensation not only impacts
individual workers; it also places an additional
burden on the region’s safety net services and
thereby on the greater public.
In a hidden subsidy for industries paying
substandard wages, the region's taxpayers
provide state- or county-sponsored children’s
health coverage, low-income tax credits, and free
or reduced school lunches to low-wage workers
in order to make ends meet for themselves and
their families.
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Secondary Public Subsidy for a Non-Prevailing Wage
Construction Job Without Health Benefits
Santa Clara County, 2009
Total seconday subsidy
$9,000
$8,032
$6,000
$4,904
$3,665
$3,000
$916
$0
Single adult
1 parent, 2 kids
2 parents (both
working), 2 kids
2 parents (1
working), 2 kids
Figure 2.
3. Source: Government Transfers to Low-Wage Workers Calculator
Taxpayers subsidize employers through public
assistance programs only if those employers are
not paying a livable wage with health benefits.
To approximate compensation on prevailing
wage projects versus non-prevailing wage
projects, the model uses average weekly wages
for Santa Clara County construction workers
covered or not covered by a union contract. We
also modeled the presence or absence of
affordable family health coverage, using the
simplifying assumption that workers on
prevailing wage projects have comprehensive
job-based family health insurance, while those
on non-prevailing wage projects do not.
The hypothesized reduction in wages, combined
with a loss of health coverage, would incur a
secondary subsidy from taxpayers totaling
between $916 and $8,032 annually per worker
affected, with the midrange subsidy estimated at
$3,665 annually per worker affected.
With this secondary subsidy propping up
inadequate pay, the majority of responsible
employers who do pay livable wages find
themselves at a competitive disadvantage.
Furthermore, the burden of the invisible public
subsidy for low-wage work threatens the region’s
social safety net. Emergency rooms, community
clinics, and hospitals such as Valley Medical
Center are hard-pressed to maintain adequate
health services as the number of uninsured
workers has grown to more than one-fifth of
Silicon Valley’s workforce.10
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EDUCATION AND TRAINING OPPORTUNITIES
•
•
•
In the past twenty years, 14,104 County residents have been educated through
apprenticeship programs. These privately funded industry training centers provide
motivated students with no-cost education and paid on-the-job experience.
Because they provide placement opportunities for apprentices, prevailing wage projects
are critical to sustaining the apprenticeship system.
If apprenticeship programs could no longer enroll students, it would be equivalent to
cutting enrollment at San Jose City College in half.
Apprenticeship is a form of post-secondary
education that combines classroom and handson training with paid on-the-job training.
Apprenticeship programs require an intensive,
long-term commitment from the student; the
training period is three to five years and typically
requires successful completion of a curriculum
of 400 to 800 classroom hours combined with
3,000 to 8,000 hours of on-the-job training,
where apprentices work side by side with
experienced workers to learn the skills required
for a trade.
Joint
labor-management
apprenticeships (which represent
92% of all apprenticeship graduates
in California) are free to the
student and offer full-time paid
work experience with a living wage
and healthcare coverage, making
them a key pathway for students
with limited financial means who
are seeking a lifelong, familysupporting career.11
the present, 14,104 Santa Clara County residents
participated in apprenticeship programs.
With an average annual enrollment of 2,339
students, apprenticeship programs in Santa
Clara County educate approximately half as
many full-time equivalent students annually as
Mission College (4,423 FTE students in 2008) or
San Jose City College (4,457 FTE students in
2008). Privately funded apprenticeships thus fill
a significant gap in the educational system.
Ethnicity of Construction
Apprentices in Santa Clara County
Hispanic,
63%
American
Indian or
Alaskan
Native, 1%
Joint apprenticeships are paid for
and overseen by a training trust fund, which is
funded by a small hourly contribution made by
all journey-level workers in the trade who are
union members or work for a participating
employer. The State of California Department of
Apprenticeship Standards has oversight
authority over all registered apprenticeship
programs in the state.
The registered apprenticeship system is the
primary source of highly trained workers for the
California construction industry. From 1990 to
Caucasian,
26%
Asian or
Pacific
Islander,
5%
Black, 5%
The San Jose prevailing wage policy, like state
prevailing wage, requires contractors to employ
apprentices in specified ratios on covered
projects. These public works projects provide
critical paid work experience for apprentices
Studies which have examined the relationship
between prevailing wage and workforce training
show that states with prevailing wage laws have
more apprentice training slots, higher rates of
apprentice completion, and better training
outcomes for ethnic/racial minorities than do
states without prevailing wage laws.12
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If prevailing wage were eliminated, then
opportunities for apprentices on public works
projects would likely decline substantially.
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Prevailing wage is therefore critical to sustaining
the apprenticeship system.
WORKFORCE DIVERSITY
•
Relative to the total construction workforce in Santa Clara County, joint apprenticeship
programs employ 1.4 times more women and 4.7 times more African-Americans.
Women and minorities, particularly AfricanAmericans,
have
historically
been
underrepresented in the United States
construction industry. Joint apprenticeship
programs in California typically enroll a higher
proportion of women and underrepresented
minorities than are employed in the industry at
large, making them a valuable pipeline for
increasing these populations’ access to
construction careers.
at large to employ an African-American.
Examining the data by gender, women
comprised just 1.7% of construction industry
workers, yet made up 2.4% of enrollments in
joint
apprenticeship
programs.
Joint
apprenticeships were therefore 1.4 times more
likely than the industry at large to employ a
woman.
Figure 4. Data represents residents of Santa Clara County. “Construction industry”
includes residents employed in non-supervisory construction occupations.
Source: DAS and ACS 2006-2008
An analysis of joint apprenticeship program
enrollments in Santa Clara County compared
with construction industry employment from
2006-2008 shows that 126 African-Americans
residing in Santa Clara County enrolled in joint
apprenticeship programs during this period,
making up 4.7% of all enrollments. Among all
residents
employed
in
non-supervisory
construction occupations, African-Americans
made up just 1.0%. Joint apprenticeships were
therefore 4.7 times more likely than the industry
While these numbers are still low, they indicate
that the pipeline of workers currently being
trained through apprenticeship programs, if they
remain employed in construction, will diversify
the industry relative to its current state.
If prevailing wage projects did not provide
placement for apprentices, the opportunity to
access construction careers for women, African
Americans and other underrepresented groups
could be considerably reduced.
P R E V A I L I N G W A G E I N S A N
TRAFFIC AND ENVIRONMENTAL IMPACTS
•
•
J O S E
13
In 2008, non-local construction workers employed in Santa Clara County cumulatively
drove over 1 million miles per day to and from work. If this work were instead performed
by locals with shorter commutes, then the estimated savings would be 123,619,000 miles per
year.
If a project is not covered by prevailing wage, then the shift towards a non-local
construction workforce induces excess commute miles, resulting in traffic congestion, less
livable neighborhoods, lower social cohesion, and increased greenhouse gas emissions.
In addition to economic impacts, importation of
a non-local workforce creates traffic and
environmental impacts caused by longer
commutes. Analysis of construction workers in
non-supervisory
occupations
(Blue-Collar
Construction Workers) employed in Santa Clara
County from 2006-2008 shows that 66% lived
within the county. Of the remainder, 10% lived
in the Central Valley, 6.4% in Alameda County,
4.9% on the Central Coast, and the remainder
scattered throughout the state.13
average of 43 weeks of work per year for
BCCWs14, the non-local construction workforce
in 2008 accounted for a total of 191,218,000
Vehicle Miles of Travel (VMT). If the work done
by non-local commuters was instead performed
by local residents, then the estimated savings in
annual VMT (after subtracting the average incounty commute) would be 123,619,000 miles. 15
Estimating commute times based on county of
residence, in 2008, non-local Blue-Collar
Construction Workers (BCCWs) employed in
the county drove an estimated 1,084,000
commute miles daily.
Excessive commute distances generate traffic
congestion, impact neighborhood livabilty, and
pollute the air. Nationally, the San Jose area
ranks as the 6th most congested commute shed,
averaging 53 hours – or more than 2 full days –
of traffic delay per driver in 2007. This
congestion cost the South Bay an estimated $1
billion in lost productivity and wasted fuel.16
The average non-local construction worker had
a round-trip commute of 105 miles, compared
with an average daily commute of 37 miles for
BCCWs living in Santa Clara County. With an
Commute times and traffic congestion have
significant impacts on livability and community
cohesion. Long commutes limit the amount of
time that workers have available to spend at
Table 3: Top 10 Counties of Residence for Non-Local
Construction Workers Employed in Santa Clara County
Top 10 Counties
1. Alameda
2. Santa Cruz
3. Merced
4 San Joaquin
5. San Mateo
6. Contra Costa
7. Stanislaus
8. San Francisco
9. Monterey
10. Solano
Round-trip Distance to Santa Clara County (miles)
72
84
202
163
70
113
191
89
125
189
P R E V A I L I N G
W A G E
I N
home and in their communities, reducing civic
participation and straining families. Local
residents are affected indirectly as increased
highway congestion generated by commuters
forces locals to spend more time in traffic.
Finally, miles travelled by passenger vehicles are
a major driver of climate change; in fact, they are
the single largest CO2 emitter in California. In
addition to accounting for 27% of the state’s
greenhouse gas emissions, vehicle emissions
produce smog and other pollutants that affect
residents’ health.17 California’s historic Global
Warming Solutions Act of 2006 (AB32)
committed the state to reduce its total
greenhouse gas emissions to 1990 levels by 2020
S A N
J O S E
The imperative to reduce Vehicle Miles of Travel
is further emphasized by SB 375, passed in 2008,
which requires regions throughout the state to
take greenhouse gas emissions into account in
their land use planning. Santa Clara County
faces considerable challenges to meeting this
goal. Total VMT in Santa Clara County rose by
41% between 1990 and 2000 and are expected to
double by 2030.18
REFERENCES
1
Jenny Reid Austin et al, Silicon Valley Roots (2006). Sunnyvale, CA: NOVA Workforce Board.
See Appendix A for a review of existing literature on construction costs and prevailing wage.
3
JaeWhan Kim, Kuo-Liang Chang and Peter Philips, "The Effect of Prevailing Wage Regulations on Contractor Bid
Participation and Behavior: A Comparison of Palo Alto, California with Four Nearby Prevailing Wage
Municipalities". Article, Refereed Journal, submitted, Nov. 30, 2010.
4
Other types of capital improvement projects such as parks, water, sewers, roads, and airport taxiways are not
included in this analysis because they may differ significantly in subcontracting patterns from municipal buildings.
This analysis provides a conservative estimate of impacts because not all capital improvement projects are included.
5
As of June 2009, Applied Materials had 3,988 full-time equivalent employees in greater Silicon Valley. Source:
Silicon Valley/San Jose Business Journal Book of Lists, Vol. 27, No. 36, Dec. 25, 2009, p. 114.
6
As of June 2009, Adobe Systems had 1,850 full-time equivalent employees in San Jose. Source: Ibid, p. 112.
7
SportsEconomics LLC, “Market Assessment and Economic Impact Analysis for Proposed Soccer Stadium in the
City of San Jose (A Secondary Study).” Prepared for City of San Jose, February 8, 2008.
8
See http://www.sjeconomy.com/publications/pressreleases/sunpower_11_16_10.pdf, Subsidy package is subject to
approval of the San Jose City Council.
9
RIMS II Multipliers for the state of California, July 2002 Release, Bureau of Economic Analysis.
10
American Community Survey 2009.
11
Corinne Wilson, Construction Apprentice Programs (2009). San Diego: Center on Policy Initiatives.
http://onlinecpi.org/downloads/Construction%20Apprenticeship%20Programs%20report.pdf
12
Peter Philips and Cihan Bilginsoy, “Impact of Prevailing Wages on the Economy and Communities of
Connecticut.” (2010) University of Utah.
13
Analysis of Blue-Collar Construction Workers (BCCWs) performed by Alex Lantsberg with data drawn from ACS
2006-2008. This data covers the entire construction industry, including residential, commercial, and public sectors.
While the data source used does not differentiate between these sectors, it is likely that large commercial or public
jobs attract a higher proportion of non-local workers than does the residential sector.
14
ACS 2006-08, accessed via DataFERRETT.
15
Using BCCW dataset described above, commute distances between counties were estimated with Google Maps.
Workers residing more than 200 miles from Santa Clara County are excluded on the assumption that they are
unlikely to commute daily. Means of transportation to work is estimated using the 2009 American Community
Survey Workplace Geography dataset. Commute distance within Santa Clara County estimated using 2005 MTC
data adjusted for BCCWs using the ACS travel time to work variable.
16
Shrank, David and Lomax, Tim. “2009 Urban Mobility Report.” Texas Transportation Institute. July 2009.
17
California Air Resources Board, “California Greenhouse Gas Inventory for 2000-2008”, updated May 12, 2010.
18
Metropolitan Transportation Commission Projections.
2
14
and to 80% below 1990 levels by 2050 – a goal
that can only be reached if vehicle-produced
emissions are greatly reduced. California voters
recently affirmed their support of this goal by
decisively rejecting a Nov. 2010 ballot measure
attempting to suspend AB32.